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City Council Buys Into Plan to Make Condo Developers Pay Up

Santa Barbara leaders vote in favor of an amendment that would require fees to fund middle-class housing.

Closing a potential loophole for small-time condominium developers, the Santa Barbara City Council on Tuesday gave the nod to a draft ordinance that would require them to set aside money for building housing for the middle class.

Tuesday’s 6-1 decision was in favor of an amendment to the four-year-old “inclusionary housing” ordinance, which aims to help retain middle-class workers in one of the nation’s most expensive housing markets.

The ordinance requires developers of condo complexes of at least 10 units to set aside 15 percent of them for people with middle-class incomes. Tuesday’s amendment would extend the ordinance to include projects with as few as two units.

Under the new rules, the developers of such projects would not be required to build extra affordable units, but instead must contribute a fee of $17,700 per unit to the city’s affordable housing fund. It turn, the city could use the money for a variety of purposes, such as subsidizing developments for workforce housing.

The final wording of the ordinance still needs to be crafted by the ordinance committee for future council approval, but Tuesday’s decision brings the proposal close to realization.

Voting against it was Councilor Dale Francisco, who opposes the entire ordinance because he says it’s ineffective and unfair to property owners and home buyers.

“We should not be singling out one group of people simply because we can get the money from them,” he said. “It is extortion.”

Supporters countered that Santa Barbara’s housing market is unusual, for its stratospheric nature and for how converting rental apartments into condos can create instant wealth.

“Our housing market is just kind of crazy,” Mayor Marty Blum said. “I really do prize our diversity here in this city. We need to find ways to keep our middle-income people around and close by.”

Council members Das Williams and Helene Schneider said the amendment would close a loophole, noting that the vast majority of condo developers have skirted the requirement of the original ordinance by building fewer than 10 units. Staff members said that 95 percent of the nearly 200 condos added to the market since the original ordinance was passed have been a part of such smaller developments.

“That’s about $3.5 million of inclusionary fees that we just didn’t capture,” Williams said.

The ordinance does not generate money for residents considered poor, but the city receives federal money for that purpose. Over the course of four years, about 70 units have been built or approved for the middle class.

City staff members said a recent auction for three units drew about 140 applicants.

Winners are prohibited from selling the dwellings at market-rate prices for 90 years. They also are forbidden from renting them out.

In some cases, two-bedroom condos have sold for about $350,000, a little more than half the median market value.

Noozhawk staff writer Rob Kuznia can be reached at [email protected]

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